March 01, 2005

Fen-Phen Follies

Alison Frankel has an extensive article in today's American Lawyer (available online at law.com) chronicling the extensive Fen-Phen litigation, which she calls "a disaster of a mass tort." Drug manufacturer Wyeth has already shelled out $14 billion in the litigation and has recently increased its reserves to account for a total expected cost of $21 billion.

Writes Frankel:

But it's not the cost of the litigation that makes fen-phen so remarkable and disturbing a story. It's where the money went. The court records of the global class action by which Wyeth attempted to resolve its fen-phen problems are a veritable catalogue of ignominy. Law firms allegedly attempting to fleece a lawyer-built victims trust fund. Doctors working for contingency fees, filing questionable supporting reports. Corporate executives, facing the prospect of ruin, hurling money at claimants. The fen-phen class action approved in 2000 was supposed to be a new paradigm of how to resolve a mass tort equitably. Instead, the iron law of unintended consequences has ruled. Misconduct has not been punished, but rewarded.

In many respects, Fen-Phen litigation has resembled that for asbestos: "Some uninjured people have been paid to go away while thousands of claimants alleging real injuries still wait for compensation." How? Doctors at the Mayo clinic discovered a link between Fen-Phen and a heart valve disorder. The association was strongest for aortic valve damage, a rare condition. But, contrary to Wyeth's initial models, most claims wound up coming in for mitral valve damage, "a much more common condition among overweight people generally."

And as we've seen in asbestos litigation, there was lots of funny business in how the actual medical evidence of injury was collected. Two law firms were set to take in $50 million for 120 claimants when a whistleblower approached the trust fund administrator. The trust fund did its own review and found that only 7 of the claimants were eligible for recovery, for a much smaller sum of $3.2 million. An six-day inquiry by Judge Harvey Bartle III of the Eastern District of Pennsylvania focused on 78 claimants who had been screened by 1 of 2 doctors. The first of these "was working on contingency for the Hariton firm; he received an extra $1,500 whenever a claimant he'd evaluated submitted a green form to the trust." As for the second doctor, the judge stated that her "mass production operation that would have been the envy of Henry Ford," and her lead sonographer had been trained by an employee of the plaintiffs' firm.

Judge Bartle ultimately ordered that payment could be withheld from each of the 78 claimants until new doctors had reviewed their case. He also permitted the trust to audit every claim. The fund hired Richard Scheff, a former federal prosecutor, who "says he had never before encountered anything like the shenanigans in the fen-phen litigation. 'I was stunned,' he says. 'Stunned. Truly, truly stunned.'"

Those of us who've followed mass tort shenanigans in other contexts are less surprised. I encourage everyone to read the entire article.